The High Court in this case concluded that the LOU issued by Owners’ P&I Club is to be construed not as a bilateral agreement but as a unilateral submission and as such, the standard “exclusive jurisdiction clause” in the Club’s LOU is not binding upon cargo interests.

Insurers of cargo carried on board the vessel Flag Evi brought a cargo claim in the Jordanian courts against the owners of the vessel and their P&I Club.

Owners and their Club applied to the English High Court for an anti-suit injunction against the cargo insurers. Owners argued that they were entitled to an injunction on the basis that the proceedings were in respect of cargo carried under bills of lading incorporating the Charterparty’s English law and London arbitration clause.

The Club also argued that a letter of undertaking (LOU) that they had issued to the cargo insurers and their assured was governed by English law, and contained an exclusive jurisdiction clause in favour of the English courts.

The two applications were dealt with separately by the court.

Judgment

Owners’ application

The court accepted that the London arbitration clause was incorporated in the bills of lading and therefore the question was whether there was any good reason why an anti-suit injunction should not be granted against the cargo insurers (The Angelic Grace [1995] 1 Lloyd’s Rep 87).

Although the Hamburg Rules were in force in Jordan, the authorities made it clear that an exclusive jurisdiction clause was regarded as being of great significance, and that the parties’ bargain, freely entered into by them, should not lightly be disregarded. Prima facie commencement of proceedings elsewhere was a breach of contract.

The jurisdiction granted to the Jordanian courts by the Hamburg Rules was not an imperative jurisdiction designed to protect individuals or fundamental rights. It is a different permissive means for managing a bargain between international corporate counterparties who had a freedom to contract. The court noted that the parties are commercial counterparties and that neither is an individual.

Also, the Hamburg Rules approach was not one which was adopted in the English jurisdiction. There seems to be no likelihood of the Hamburg Rules being adopted here.

The court therefore granted the Owners’ application for an anti-suit injunction against the cargo insurers.

The P&I Club’s application

The Club’s application for an injunction was however refused. The jurisdiction clause in the LOU provided that: “This Letter of Undertaking shall be governed by and construed in accordance with English law and we agree to submit to the exclusive jurisdiction of the English Courts.”

The Club argued that they have been unable to locate any case where the phrase “exclusive jurisdiction” was used and the clause not held to be an exclusive jurisdiction clause.

The court however concluded that language of the LOU was not of bilateral agreement, but of unilateral submission. The wording placed the emphasis on obligations undertaken by the Club towards cargo interests. Even the format of the LOU, i.e. on the Club’s headed notepaper and addressed to cargo interests, and signed by the Club only, led to such a conclusion.

In the alternative, the Club argued that the Jordanian proceedings were vexatious and oppressive and therefore they should be stopped. But the court disagreed. In the court’s opinion Jordanian proceedings were following on the proceedings brought as of right against Owners.

Comments

This decision has come as a surprise. The exclusive jurisdiction clause in the LOUs is widely used and its meaning seemed clear to commercial people. The Clubs will have to think of a way to ensure that an exclusive jurisdiction clause in a LOU can be enforced. One way of doing this may be for the Clubs to require cargo interests to countersign the LOU, and to use phraseology other than, “we agree to submit”.